Tourism entrepreneurship Richard Kisasembe Assistant Lecturer Dept. Wildlife Tourism Entrepreneurship defined • Entrepreneurship is the process of introducing ideas and transform those ideas into marketable products and services with the aim of earning profit. • is the process of getting into and operating one’s own business. • Entrepreneurship is the ability to create and build a vision from practically nothing. What is Entrepreneurship? 1. The Process of • Initiating a Business Venture, • Organizing the Necessary Resources, • Assuming the Associated Financial, Psychological and Social Risks & Rewards 2. Having the Characteristics of an Entrepreneur, e.g. • Brave, innovative, independent, and achievement oriented What is an Entrepreneur? • The term Entrepreneur • The word entrepreneur is derived from the French entreprendre, meaning to undertake. • An Entrepreneur (ahn’tra pra nur) is a person who organizes and manages a business undertaking, assuming the risk for the sake of profit. Entrepreneur Cont’d One who creates a new business in the face of risk & uncertainty for the purpose of achieving profit & growth by identifying opportunities and assembling the necessary resources to capitalize on them. • An entrepreneur is an individual who undertakes creation, organization, and ownership of a business (Meyer and allen,2000) • It is also called by various names, e.g. adventurism, risk taking, innovating, etc. Who Are Entrepreneurs? Persons who start and/or operate a business. Individuals who discover market needs and develop new ideas to meet those needs. Risk takers who provide an impetus for change, innovation, and progress. All active owner-managers (founders and/or managers of small businesses). Varieties of Entrepreneurs • Founder (“Pure” Entrepreneur) A person who brings a new firm into existence. • Administrative Entrepreneur An entrepreneur who oversees the operations of an ongoing business • Franchisee An entrepreneur whose power is limited by the contractual relationship with a franchising organization. • Entrepreneurial Team Two or more people who work together as entrepreneurs. What do entrepreneurs do? • Entrepreneurs introduce a new product or service into the market place • Entrepreneurs discus new resources or new uses for old resources • Entrepreneurs develop new technology • Entrepreneurs open new markets • Entrepreneurs organize existing enterprises What does he take? • • • • • • Critical and creative thinking Goal setting Decision making Human relations and communication Management skills and Problem solving Why become an entrepreneur? • • • • • • • • Being your own boss Doing something you enjoy Having opportunity to be creative Freedom to set you own schedule/independence Controlling your salary Contributing to the community Better quality of life Satisfaction of building something from nothing Rewards of Being an Entrepreneur o High degree of independence-freedom from constraints o Get to use a variety of skills and talents o Freedom to make decisions o Accountable to only yourself o Opportunity to tackle challenges o Feeling of achievement and pride o Potential for greater financial rewards Entrepreneurial • Entrepreneurial- means of or having to do with an entrepreneur (s) • The entrepreneurial process include five key components • The entrepreneur • The environment • The opportunity • Start up resources • The new venture organization • The entrepreneur • is the driving force that recognizes opportunity, pull together the resources to exploit the opportunity, and creates a company to execute that opportunity in the market place • The environment • A new business environment includes all those variables that affect it that are not controlled by the entrepreneur e.g skilled labor, taxes, market • Start up Resources • To execute a concept for a new business, an entrepreneur must use his or her creative talent to pull together the necessary people and capital. The start up resources an entrepreneur needs to start a business include i. Capital ii. Skilled labor iii. management expertise iv. a facility v. equipment, vi. and most important customer The opportunity • Is an idea that have commercial value. An idea for a new product only has value if there are customers ready and willingly to buy it. • An idea + a market equals an opportunity • The new Venture organization • Is the shell that surrounds all the products, processes, and services that are part of the new business • In new venture creation there are • Entrepreneurs: Individuals who establish a new organization without the benefit of corporate support. • Intrapreneurs: New-venture creators working inside big companies; corporate entrepreneurs. Five elements for entrepreneurship to happen… The environment 1 The organizational context/ new venture The entrepreneurial process The concept opportunity The resources The entrepreneur Dominant Characteristics of entrepreneurs 1. Persistent. Entrepreneurs are willingly to work until a job is done, no matter how long it takes. 2. Creative. Entrepreneurs continually looking for new ways to solve old problems 3. Responsible. Entrepreneurship do not pass the buck. They take responsibility for their decisions and actions 4. Inquisitive. Entrepreneurs want to know as much as possible about anything that might affect their venture. The conduct research to solve problems 5. Goal oriented. Entrepreneurs decide where they want to go and then set out to get there 6. Independent. Entrepreneurs want to set their own and schedules. They want to make their own decision 7. Self demanding. Entrepreneurs have higher expectations of themselves 8. Self confident. Entrepreneurs believe in themselves and act accordingly 9. Risk taking. Entrepreneur like to take risk, but they are not reckless. They seek opportunity that offer both challenge and reasonable chance of success 10.Restless. Once entrepreneurs achieve their goals, they begin looking for new challenges 11. Action oriented. Entrepreneurs are doers as opposed to spectators. They make decision and act on them Table 2.1 Characteristics Often Attributed to Entrepreneurs 1. Confidence 15. Intelligence 29. Pleasant personality 2. Perseverance, determination 16. Orientation to clear goals 30. Egotism 3. Energy, diligence 31. Courage 4. Resourcefulness 17. Positive response to challenges 5. Ability to take calculated risks 6. Dynamism, leadership 7. Optimism 8. Need to achieve 9. Versatility; knowledge of product, market, machinery, technology 10. Creativity 11. Ability to influence others 12. Ability to get along well with people 18. Independence 19. Responsiveness to suggestions and criticism 20. Time competence, efficiency 21. Ability to make decisions quickly 32. Imagination 33. Perceptiveness 34. Toleration of ambiguity 35. Aggressiveness 36. Capacity for enjoyment 37. Efficacy 22. Responsibility 38. Commitment 23. Foresight 39. Ability to trust workers 24. Accuracy, thoroughness 40. Sensitivity to others 25. Cooperativeness 41. Honesty, integrity 26. Profit orientation 42. Maturity, balance 13. Initiative 27. Ability to learn from mistakes 14. Flexibility 28. Sense of power Sources of enterprise ideas on entrepreneurs 1. PUBLICATIONS: • These include research based and popular publications such as: i. Technical and professional journals. • These refer to journals that contain articles dealing with research. ii. Text books on Entrepreneurship. • These text books address the operation of small firms and non profit organizations. They may have sections devoted to research on entrepreneurs. • Books about Entrepreneurship;-These are written as guides, some deal with problems facing the individual, who starts a business, others deal with a specific aspect of the subject. iii. Bibliographies of entrepreneurs. iv. New periodicals. • Many newspapers or new periodicals run stories on entrepreneurs either regularly or periodically. - Venture periodicals. - Some new magazines are concerned specifically with new business venture. v. News letters-These involve those newsletters related to entrepreneurship. vi. Proceedings of conferences. • These are publications relating to annual or periodic conferences deals at least in part with entrepreneurship. vii. Government Publications. • A government may publish useful information on entrepreneurship, small business operations and specific small business. 2. DIRECT OBSERVATION: • This involves observing practicing entrepreneurs though the use of interviews, surveys and case studies the activities of individual entrepreneurs can be related. • Analysis of these experiences can provide insights into the traits, characteristic and personalities of individual entrepreneurs and discovers commonalties that help explain the perspective. 3. SPEECH AND PRESENTATION: • These involve speeches by practicing entrepreneurs. • This source provides an opportunity to learn about the entrepreneur perspective. RISKS FACED BY ENTREPRENEURS( dark side of entrepreneurship • Starting or buying a new business involves risk and the higher the rewards, the greater the risk entrepreneurs usually face. • Entrepreneurs face a number of risks that can be grouped into four basic areas: 1. Financial risks: • In most new ventures, individual resources will be lost if venture fails. • Many people are unwilling to risk their savings, house property and salary to start a new business. 2. Career Risk: • A question frequently raised by would be entrepreneurs are whether they will be able to find a job or go back to their old job if their venture should fail. • This is a concern to managers who have a secure organizational job with a high salary and a good benefit package. 3. Family and social risk: • Starting a new venture uses much of entrepreneurs’ energy and time. • Consequently his or her other commitment may suffer e.g. old friends may vanish slowly because of missed get together. • 4. Psychic Risk: • The greatest risk may be to the well being of the entrepreneur. They can be replaced a new house can be built; spouse, children and friends can usually adopt. • But some entrepreneurs who have suffered financial catastrophes have been severely affected psychologically. The ten deadly mistakes of entrepreneurship • • • • • • • • • • Management mistake Lack of experience Poor financial control Weak marketing efforts Failure to develop a strategic plan Uncontrolled growth Poor location Improper inventory Incorrect pricing Inability to make the “entreneurial transaction” Creativity and Innovation • Creative as a prerequisite to innovation • Creativity - is “the ability to bring something new into existence or Process of generating new ideas Where as • Innovation - is the process of doing new thing or Process of generating and applying new ideas. Or • Innovation - is the transformation of creative ideas into useful applications by combining resources in new or unusual ways to provide value to society for or improved products, technology, or services. 36 Entrepreneurship and small business • Entrepreneurship is elusive term • It is commonly linked lo small business management because it involves the process of recognizing opportunities and development of new ventures, but entrepreneur operate in a range of context including larger corporations and the public sector, not just small businesses (Stokes and Wilson,2006) 37 Small business • It is generally much easier to identify a small business when you see one than to define it, although sometimes even identifying the small business entity may not be easy at all. • Some businesses such as shoeshine businesses would most probably be identified as being small by all observed. • Likewise, other businesses undertakings, such as Pepsi-Cola Company, would perhaps be identified as being big by every one. • But how would most people likely classify business entities that lie between these two extremes? • At best, the classifications between the two extremes would largely depend upon the different and biased perceptions of individuals. What is a small business? • Is the one which is independently owned and operated and not dominant in its field • A “small business’ is conceived of as any business undertaking that meets all the following conditions or characteristics and describe the domain of small business; they include: • (i) Ownership: • Independently owned and managed by an individual entrepreneur, or a small group of entrepreneurs or family members. • (ii) Dominance: • Relatively small in its field of operation when compared to other business entities in the field. • (iii) Capital: • Capital is supplied by and ownership is held by an individual or a few individuals. 41 (iv) Area of operation: • Operated in a definite location or local community, but with no restriction regarding the extent of its market; ie. • The area of operation is primarily local although the market isn’t necessarily local. • Taken together, these characteristics provide a qualitative description of small business. • However, it is important to consider both the qualitative definitions and the qualitative factors when trying of define small business. • Economically a small firm has a relatively small share of the market. - Managerially, it is administered by its owners or part owners in a personalized way, rather than by means of a formalized management structure. - Financially, it is independent in the sense that it does not form part of a larger enterprise and owner-managers are free from outside control in taking their principal decisions (Bolton Committee, UK) • However, these are no proper parameters’ by which one can precisely define small business enterprise, much depends on the nature of the industry in which they operate and personalities who ran the businesses. Small Business vs. Entrepreneurial Venture • Small business- a business having fewer than 100 employees, independently owned and operated, not dominant in its field, and not characterized by many innovative practices. • Entrepreneurial venture- A new business having growth and high profitability as primary objectives • In Tanzania small businesses are divided into two categories: • Formal sectors; • Informal sectors. What is the Tanzanian Definition? • It is apparent that a small firm in the UK and/or USA might not be small as in Tanzania, or alternatively a large firm in Tanzania might not be large in the above countries. Tanzanian Definition of SMEs 49 Characteristics of small business 1. Small size: • The size of these businesses is small in terms of capital and number of employees. 2. They are independently managed: • Managed by owners, family members, relatives or other employees but they don’t have formalized management structure. 3. They are independently owned: • They are owned by the owner manager. They do not form part of a large enterprise and the owner managers are free from outside control in making dye decisions. 4. Employ few workers: • - Less than 50 workers • - Less than 10 workers for micro-enterprises. 5. Localized operation: • - Operations of the business are localized with workers and owners living in one home community although markets need not to be local. 6. Small market share • The relative size of the business within its industry is small. 7. Presence of an entrepreneurial - spirit • It involves innovation, initiative and risk taking. Role Of Tourism Enterprises In Socio Economic Development 1. Employment creation/Job creation to: • Retrenched people from privatized parastatal organizations. • Retired civil servants. • Primary/Secondary schools leavers. • Graduates from universities and colleges. • Skilled, semiskilled and unskilled workers. 2. Increased national income: • tourism firms increase GNP and per capital income and hence improves the standard of living. This is due to the fact that the capital required is relative low and turnover is very high. 3. Generate wealth and spread prosperity: • Creation of new business creates wealth, which is eventually distributed to all members in various forms. Business owners, suppliers, financiers, distributors and other interested parties are all beneficiaries to the wealth created. 4. Encourage grass root development: • There has been a notion that those who form tourism businesses are likely to coming from local people resources. It encourage people to restore their cultural values. • 5. It is the source of foreign: • currency and contributes to improvement of balance of payments of the country. 6. Creation of health competition: • Tourism firms compete against other similar sector hence increase efficiency and improve quality of goods and services. 7. Revenue to the government: • They broaden the tax base; and employees of tourism business pay tax to the government. 8. Utilization of local available resource: • Tourism entrepreneur use locally available resources thus they are easy to be established and they reduce both financial and technological dependencies. • They extract resources that would otherwise not be exploited. 9. Provide auxiliary products and services to other firms: They provide inputs to other firms. 10. Avenues for independent innovation: • Tourism entrepreneurship business/firms provide avenues for potential owners and innovators who wish to developed new products or new services from new ideas. E.g. they encourage innovation. 11. Creation of balanced economic development: • Some Tourism enterprises need relative small capital and operate in rural, semi-rural and urban areas. • They create employment in rural areas, and prevent rural urban migration. • They contribute to balanced development in both rural and urban areas. 13 Provision of goods and services: • They provide variety of goods and service direct to consumers. Problems of Small Business in Tanzania: • Although the Tanzania government has been encouraging its people to engage in tourism businesses, those who respond to government’s call encounter the following problems: 1. Inefficiency bureaucracy and regulatory environment • Business registration and reporting environment has led most of the tourism businesses to operate in informal sector. Long procedures for business registration. • High tax rates. • Corruption in many areas of public services. • High registration costs. 2. Inadequate financial services for small business sector: • Lack of access to finance. • Government has been priotizing achievement of macro economic policies such controlling inflation, paying debts; etc. • Lack of wide coverage by commercial banks. • Commercial banks give priority to large firms/business. Weak financial infrastructure: • This includes the following: • Weak financial market • Weak financial institutions. 3. Poor physical and business support infrastructure: . Poor telecommunication infrastructure, road, airlines services, railways, ports, warehousing and international trade services. . Poor infrastructure present barriers to market entry and growth of small businesses. 4. Lack of government business support services: • Due to privatization policy organization such as SIDO has been loosing their autonomy. • Most tourism business owners cannot afford to pay the cost of consultancy. • Inadequate business advisory services. 5 Lack of skilled staff ( lack of training); • Poorly trained or untrained personnel. • Lack of management skills. 6. Inadequate quality control: • The quality of the products is low to compete with the low cost imports. 7. Poor management: • Lack of management skills in key departments such as Accounting, Finance, Inventory management, Procurement, marketing and other endogenous functional areas cause business failure. 8. Under-capitalization: • Lack of sufficient initial capital make it difficult to start small business. • Low operating capital due to poverty. • Excessive drawing reduces capital. 9. Inaccessibility to market intelligence: • Lack of marketing information in terms of market size, customers behaviours, product preferences competitive strength and weaknesses lead to inadequate sales and business failure. 10. Serial and historical traditions: • Gender inequality leads to poor participation of women to business activities. • Lack of ownership right for women make their participation in small business to be very low. 11. Inadequate government policy to support entrepreneur : • - Taxes are too high. • - Education curriculum does not put emphasis on entrepreneurship. 12. Lack of access to modern technology due to lack of funds. • Questions: • Discuss the Role of tourism enterprises Tanzania. • Describe the main problems which limit the growth of small businesses in Tanzania. • Discuss the solutions to the problems facing small businesses in Tanzania. Drawbacks of Small Business Ownership Uncertainty of income Risk of losing entire investment Long hours and hard work Lower quality of life until the business gets established High levels of stress Complete responsibility Discouragement Benefits of Small Business Ownership The opportunity to: create your own destiny make a difference reach your full potential reap unlimited profits contribute to society and be recognized for your efforts do what you enjoy and have fun at it Field or scope of small business: • There are many fields of small business from which any given prospective entrepreneur may select a business activity. • They are as follows: • Retailing, • Services, • Agriculture, • Manufacturing, • Construction, • Wholesaling; and • Mining etc. SERVICES • Essentially, service businesses are those establishments, which provide intangible products to their customers • Among the most common business activities which may be classified as services include the following: • Tourism • Taxi and minibus operations/Transportation. • Automobile, radio, watch, television, shoe and bicycle repairing • Tailoring • Hair dressing in beauty salons/ • • • • • • • • • • Shoe shining. Photography Security services Car washing Home refurbishment Customer care Accommodation Consultation Tour guiding Teaching The Tourism Industry a glance at… Means millions of people moving from the countries they live and work to another country, or countries The Third Largest Industry all over the world after Petroleum and Electronic, Producing 935 million international visitors (2010), and $ 852 Billion (US) Revenues (2009), and The largest and fastest growing services industry Tourism Industry – On the Demand side • Tourists’ motivations and behaviors - traveling people – On the Supply side • Sectors that satisfy tourist needs and supplying products tourism businesses and products – Infrastructure • Components that an area’s residents rely on, such as airports, highways, harbors that serve visitors – Superstructure • Facilities built to accommodate tourist needs, hotels, restaurants, theme parks, casinos etc. Tourism Today • Tourism today is a regular, organized and promising industry having a flow of human control. • The entire gamut of trade and trade activities seen to have combined adventure with element of tourism there by offering exciting opportunity for entrepreneurs Opportunity • To add value, all these components must be addressed • A comprehensive development in terms of having all these services providers is a prerequisite to development of tourism • Conversely as tourism grows at a destination there will be demand for these services • This in turn is an opportunity for entrepreneurs 83 Tourism Product • Narrow sense Consists of what the tourist buys (Mostly goods and services) • Wider sense Combination of what the tourist does at the destination and services used (package) Tourism product cont’d • A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. Includes physical objects, services, places, organizations, and ideas • A service is any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Tied or not to good Characteristics of tourism • Tourism Services have four attributes that typically distinguish them from goods: Higher intangibility Greater perishability Inseparability of service from the service provider Greater heterogeneity (variability) in quality IDEAS unconventional Tourism-related business • • • • • Photographic safaris Walking Trails Bird watching tours Ranch, farms, cattle Post lodgings • • • • • • • • Film industry Curio and craft factories Visit to tradition healers-medicine Game park/reserves/farms Parachuting Desert 4 x 4 trals4-wheeles Gathering products and tracking Hot air ballooning • • • • • • Desert/bush survival course Hunting safaris Snake /reptile parks/ butterfly farms Botanical gardens Museums etc Subsidiary or secondary activities • • • • • • Filling station/convenience stopovers Supply of fire woods to camps/lodge/hotels Waste collection Thatching service Supply of natural minerals Bottling and supply of spring and natural water • • • • • • Supply of tradition food items Supply of decoration and ornamental plants Horticulture Landscaping Training and HRD Tourism and wildlife consultancy Doing Business in Tourism Industry Tourism and travel Industry has the reputation of being a relatively clean and pleasant industry in which to invest Requires relatively low start up capital Setting up in the industry is often seen as simple and requiring few skills other than the off-claimed ability to get along with people Doing Business in Tourism Industry It is therefore attractive to those leaving from other jobs and investments or do not enjoy them, to buy into a bar, guest house or travel business for example. Provides opportunities for those who would like to use individual skills in a beautiful environment. i.e., a chef may happily work in pleasant resort and a tour guide/travel agent use his/her talents in the related field Provides new business opportunities, such as event management Legal forms of entrepreneurial organizations Types of business ownership • SOLE PROPRIETORSHIP • A business that is owned and operated by one person • The owner is responsible for all operations of the business and assumes all the risk. • It is the easiest and most popular form of business ownership The owner of a sole proprietorship: • receives the profits, • incurs any losses, and • is liable for the debts of the business. • In a sole proprietorship the owner must decide how much liability protection he or she needs. • liability protection insurance against the debts and actions of a business Advantages • Sole proprietorship is easy and inexpensive to create. • The owner has complete authority over all business activities. • It is the least regulated form of business ownership. • The business pays no taxes; income is taxed at the personal rate of the owner. Disadvantages • The owner has unlimited liability. • Raising capital is more difficult. • The business is totally reliant on the skills and abilities of the owner. • Owner has responsibility for all debts • Costs and time commitment can be high • Owner is responsible for all aspects of the business • Owner doesn’t have fringe benefits Partnership • Is a form of business organization in which two or more people own and operate the business together • owners share decisions, assets, liabilities, and profits • A partnership draws on the skills, knowledge, and financial resources of more than one person. Types of partnership • 1. General Partnerships • All partners have unlimited liability. • A participant in a partnership who has unlimited personal liability and takes full responsibility for managing the business • The law requires that all partnerships have at least one general partner. • limited partner • a partner in a business whose liability is limited to his or her investment; a limited partner cannot be actively involved in managing the business • Some partners have personal liability that is limited to the cash or property they invested in the firm. Advantages • • • • Partnerships are inexpensive to create. General partners have complete control. Partners can share ideas. Partners can secure investment capital more easily and in greater amounts. • Relatively easy to form • They share business losses • They share time commitment Disadvantages • It is difficult to dissolve one partner’s interest without dissolving the partnership. • There may be personality conflicts. • Partners can be held liable for each others’ actions. • Partnerships are more difficult to close down than sole What is a Corporation? •a business that is registered by a state and operates apart from its owners; it issues shares of stock and lives on after the owners have sold their interest or passed away In a corporation, the owners of the business are protected from liability for the actions of the company. “An artificial being, invisible, intangible, and existing only in contemplation of the law.” Advantages of a corporation • The owners are shareholders. • They have limited liability for the debts of the corporation and share the profits • Usually shareholders do not operate the company – they hire employees to do so • Corporations can usually raise funds more easily than sole proprietors or partners Advantages of a corporation • Corporations usually have a lower tax rate than private owners • A corporation can continue to exist after the death of its owners Disadvantages of a corporation : • Corporations have more complicated structures than sole proprietorships or partnerships • Employees who are not owners may not be committed to the business • The value of company shares can change depending on changes in the stock market Types of Corporations • Closely Held (Private) Corporation • Publicly Held (Public) Corporation • • • • S Corporation Limited Liability Corporation (LLC) Professional Corporation Multinational or Transnational Corporation Source of finance 1. Debt Source/Financing • Secured financing of a new venture that involves a payback of the funds plus a fee (interest for the use of the money) e.g Banks, Trade credit, Finance Companies 2. Equity sources/financing • Money invested in the venture with no legal obligation for entrepreneurs to repay the principal amount or pay interest on it • Other equity financing sources • Personal saving, Friends and family, Private investors, Partners , Venture capitalists ,Statesponsored venture capital funds Marketing Definition and concept • Marketing is a management process responsible for identifying, anticipating and satisfying customers requirement profitably. • Or marketing refers to setting right product, at right price ,to the right people, at right place, using right promotional tools at right time • Market is a physical place where buyers and sellers gather to buy and sell goods and services Marketing analyis Defining areas of analysis • If a business is to succeed and make a profit , it must satisfy its customers. • Every business starts with this marketing concept • However , you cannot satisfy your customers ( potential customers) if you don’t know who they are and what they want • To find out you conduct market analysis • A thorough market analysis requires that you examine the market from two entirely different perspective • On the one hand, you will need to identify your prospective customers and determine their buying behaviors • On the other hand you will need to analyze your field endeavor, or industry, and rate your prospects for success within it Target market and customer • This involve selection of target market and customer/segmentation 1. Market Segmentation- getting the detail you need breaking down the total market into groups of buyers with similar needs and interest. These are called segments. • Consumer –are usually segmented on the following bases 1. Geographics - region, state, country, and city 2. Demographics- age, gender, family size, family life circle, income, occupation, education, religion, race, nationality, and/or social class 3. Psychographics-personality, opinions, and life style elements, including activities and interests 4. Buying behavior- knowledge, personal experience 2. Target marketing • After all the segments within your range of consideration have been identified, you are ready to select your target market. • This is the specific market you are going to serve/ concentrate • Within this segment you will find you first customer • For example suppose your target market for your pizza is students. That is a broad category that need to be segmented into more manageable • Here are the guideline to use in segmenting your market. i. The market segment should be measurable. • If you have no idea how many potential buyers there are in the market, you cannot know if it is worth pursuing. ii. The segment should be large enough to be potentially profitable • You will have to spend money to market your product. The segment you selected must be big enough to enable you to recover your costs and make a profit iii. The segment should be reachable • First you must be able to reach potential customers with words. You must be able to get information about your product and its availability to interested buyers in the segment • Second, you must be able to reach potential customers physically. • You must be able to deliver your product to their homes or business or to the places where they shop iv. The market segment should be responsive • You should have some indication from your research that people in the segment would, in fact, be interested in your product and willingly to buy it • It is possible for a business to select and serve multiple market segment, but that doesn’t usually happen in the start up stage Marketing plan • This is done after completing marketing analysis and identifying your target market, you are ready to take the next step in planning your business • You must define your marketing objectives • Most business objectives relate to sales, market share, growth, and profit • Marketing plan divided into two i. Long term ii. Short term Marketing plan consists of seven strategies • i. ii. iii. iv. v. vi. vii. Traditional 4Ps extended to 7Ps to encompass growth of service industry Product Place, Price and Promotion People Process Physical Environment The Marketing Mix Price Product Promotion • • • • • Advertisement Direct marketing Sales promotion Personal selling Publicity/public relation Place People Process Process • How do people consume services? • What processes do they have to go through to acquire the services? • Where do they find the availability of the service? – – – – – – Contact Reminders Registration Subscription Form filling Degree of technology Physical Environment Physical Environment ( internal layout such as appropriate décor, furniture, and furnishing) and (intangible factors such as the ambience, or atmosphere) – – – – – – – Smart/shabby? Trendy/retro/modern/old fashioned? Light/dark/bright/subdued? Romantic/chic/loud? Clean/dirty/unkempt/neat? Music? Smell? The Business Plan • It is a detailed analysis and description of all aspects of a business over a given time frame. -Owners goals, history, market (s), products, strategies, management, organisation, operations, projections • Is a document that describes a new business Kisasembe Richard Tourism entrepreneurship BENEFITS/PURPOSES OF THE BUSINESS PLAN 1. Primary purpose of a business plan is to help entrepreneurs gain a deeper understanding of the opportunity they envision. It enables you to look at the business concept in an objective manner and can be strong reality check 2. Helps focus ideas and serves as a feasibility study of the business's chances for the success and growth Kisasembe Richard Tourism entrepreneurship 3. It is a map/framework to be followed by management. It assist you in planning and managing the business and prepares your success. 4. It is a strong communication tools. It defines your purposes, your competitors, your management and personnel 5. The finished business plan provides the basis for your financial proposal , while seeking financing from banks Kisasembe Richard Tourism entrepreneurship 6. A business plan will help you cope with change because while you are writing your plan you become a student of the business 7. Regular review of the plan continues to educate you about past decisions and planning so you can move quickly to make changes 8.To explain the business to other companies with which it would be useful to create an alliance or contract Kisasembe Richard Tourism entrepreneurship 9. To attract employees 10. To convince oneself that the new venture is worthwhile before making a significant financial and personal commitment 11. B/P can help an entrepreneur to allocate resources appropriately, handle unexpected problems, and make good business decisions 12. Be prepared for readers who do not have time to read the whole plan Kisasembe Richard Tourism entrepreneurship Who need a business plan and when • Who ? 1. Start-ups – the typical business plan is an entrepreneur seeking funds to start a new business/ new venture 2. Established firms - existing companies write business plans to secure additional financing, engage distributors or partners , or seek support for new initiatives Kisasembe Richard Tourism entrepreneurship When? • Starting a new venture ( organization, product or services) • Seeking financing from financial institution • Expanding an existing organization, product or service • Buying an existing organization, product or service Kisasembe Richard Tourism entrepreneurship STEPS IN DEVELOPING A BUSINESS PLAN • The steps below will give you a good idea of what is involved in putting together a business plan. • The timetable for developing the plan will depend on the complexity of the situation and your own time schedule. Kisasembe Richard Tourism entrepreneurship Idea is a fun thing it does not work unless you do it 144 1. Make commitment to go into business or develop your existing business for yourself. 2. Analyze your strengths and weaknesses, paying special attention to your business experience, business education and desires. Then answer this question: • Why should I be in business for myself? Kisasembe Richard Tourism entrepreneurship 3. Choose the product or service that best fits your strengths and desires. Then answer these questions: – What need will my product or service fill? – What is unique about my product or service? How do I know it is unique? – What will my product or service do for customers? – What will it not do? – What should it do later that it does not do now ? Kisasembe Richard Tourism entrepreneurship 4. Research the market for your product or service to find answers to such questions as these: • Who are my customers? • Where are they? • What is their average income? • How do they buy? • At what price? Kisasembe Richard Tourism entrepreneurship • In what quantities? • When do they buy? • When will they use my product or service? Where will they use it? • Why will they buy it? • Who are my competitors? • Where are they? Kisasembe Richard Tourism entrepreneurship 5. Forecast your share of market, if possible. • Then forecast your sales revenues over a 3year period, broken down as follows: .First year – monthly, Second year – quarterly, Third year – yearly • Next, answer this question: • Why do I believe my sales revenue forecast is realistic? Kisasembe Richard Tourism entrepreneurship 6. Choose a site for your business; then answer this question: • Why do I prefer this site to other possible sites? Kisasembe Richard Tourism entrepreneurship 7. This step applies only to entrepreneurs who plan to go into manufacturing. • Develop your production plan, answering these questions: • How big should my plant be? • How should my production process be laid out? • What equipment will I need? • In what size? • How will I control the waste, quality and inventory of my product? Kisasembe Richard Tourism entrepreneurship 8. Develop your marketing plan, answering such questions as these: • How am I going to create customers? • At what price? • By what kinds of advertising and sales promotion? • Through personal selling? How? Kisasembe Richard Tourism entrepreneurship 9. Develop your organizational plan, answering this question: – What kinds of skills and talents will I need to make my business grow? • Draw up an organization chart that spells out who does what, whom have what authority and who reports to whom. Kisasembe Richard Tourism entrepreneurship 10. Develop your legal plan, focusing on whether to form a sole proprietorship, a partnership, or a corporation, and then explain your choice. 11. Develop your accounting plan, explaining Kisasembe Richard Tourism entrepreneurship 12. Develop your insurance plan, answering this question: – What kinds of insurance will I need to protect my venture against possible loss from unforeseen events? 13. Develop a computer plan, spelling out the ways those computer services may help you plan and control your business. Kisasembe Richard Tourism entrepreneurship • 14. Develop your financial plan by preparing these statements: – A 3-year cash budget. Show how much cash you will need before opening for business and how much cash you expect will flow in and out of your business, broken down as follows: – First year – monthly – Second year – quarterly – Third year – yearly – An income statement for the first year only. Kisasembe Richard Tourism entrepreneurship – Balance sheets for the beginning and end of the first year. – A profit graph (breakeven chart), showing when you will begin to make a profit. Then determine how you will finance your business and where you expect to raise money. 15. Write a cover letter summarizing your business plan, stressing its purpose and its promise. Kisasembe Richard Tourism entrepreneurship Components of business plan 1. Introductory elements • Cover page • Executive summary-it appears in the first chapter of the business plan. It should be short, summaries current state of the business, objectives, implementation, marketing and selling aspects, financial requirement, and profit expected • Table of contents Kisasembe Richard Tourism entrepreneurship 2. Business/company description • General description of the business • Industry analysis/industry background • Description of the company vision, mission statement, objectives and value • Uniqueness of the product or services/Description of your products and services • Company positioning Kisasembe Richard Tourism entrepreneurship 3. Production plan/service development • • • • • Production and operation process Cost of products/service development Labor requirement Expenses and capital requirements Costs of goods Kisasembe Richard Tourism entrepreneurship 4. Marketing A. Market/ research and analysis • Target market( customer) identified • Marketing size and trends • Competition • Estimated market share Kisasembe Richard Tourism entrepreneurship B. Marketing plan • SWOT analysis • Marketing strategy –Estimated Sales –Distribution –Pricing –Advertising and promotion Kisasembe Richard Tourism entrepreneurship 5. Operations A. identify location Advantages Zoning Taxes B. Proximity to supplies C. Access to transportation Kisasembe Richard Tourism entrepreneurship 6. Management and organization • Management team-key personnel • Legal structure-stock agreement, employment agreement, ownership • Board of directors, advisors, consultants • Support services Kisasembe Richard Tourism entrepreneurship 7. Financial plan A. Funding requirements B. Financial forecast – Income Statements – Cash Flow Statements – Balance Sheet – Breakeven Analysis – Budgeting plan Kisasembe Richard Tourism entrepreneurship Customer care services What is customer care • Customer service-is anything we do for the customer that enhance the customer experience • Customers have varying ideas of what they expect from the customer interaction • The customer service provider must get to know his or her customer and strive to provide them with excellent customer service. Five needs of every customer 1. Service-customer expect the service that they think is appropriate for the level of purchase that they are making. 2. Price-the costs of everything we purchase is becoming more and more important 3. Quality-customer want the products they purchase to be functional to what he expect 4. Action- customer need action when a problem or question arises 5. Appreciation-customer need to know that we appreciate their request e.g saying thanks Benefit of customer care • Statistics shows that it is times cheaper to retain a customer than it is to obtain a new one, and that if you upset a customer, they tell at least 12 other people about it. That’s why in today's fiercely competitive environment, customer service will be the key to survival in the 21 cent. • Dissatisfied customers tell an average of 12 other people about it. 1. Increase sales • Good news travel fast an organization that has a good reputation and is recommendation by existing customers to other people will find the number of its customers increasing. • This means more people will spend more money in the products and services of the organization. 3. An edge over the competition • By providing excellent customer service-better than that of your competitions you will give your organization more chance of maintaining existing customer and also attracting a new one. 4. More customers through repeat business and recommendation • Good customer service can lead to repeat business, that existing customer coming back for more. In fact they will continue to return, they will te4nd to build loyalty to an organization. Ten commandment of customer care 1. Our customer- are the most important people in our business 2. Our customer-are not dependent on us, we depend on them 3. Our customer- like to be welcomed and recognized, listened to, smiled at, cared for, thanked and invited back 4. Our customers- are not people to argue with or match wits with 6. Our customers- are not cold statistic but human beings with feelings and emotion like our own 7. Our customers- want value for money and enjoyment, quality products served correctly and promptly in relaxed and welcoming surroundings 8. Our customer- give us an opportunity to serve them 9. Our customer- are deserving of our most courteous and attentive treatment 10. Our customer- are the lifeblood of our business and have paid for our service Before Starting up, ASK YOURSELF! - 1 Is Entrepreneurship For You? • There is no way to eliminate all the risks associated with starting a small business. • However, you can improve your chances of success with good planning and preparation. • A good starting place is to evaluate your strengths and weaknesses as the owner and manager of a small business. Carefully consider each of the following questions. 1. Can you start alone? • It will be up to you - not someone else telling you to develop projects, organize your time and follow through on details. Before Starting up, ASK YOURSELF! - 2 2. How well do you get along with different personalities? Business owners need to develop working relationships with a variety of people including customers, vendors, staff, bankers and professionals such as lawyers, accountants or consultants. Can you deal with a demanding client, an unreliable vendor or cranky staff person in the best interest of your business? 3. How good are you at making decisions? Small business owners are required to make decisions constantly, often quickly, under pressure, and independently. Before Starting up, ASK YOURSELF! - 3 4. Do you have the physical and emotional stamina (power) to • • • run a business? Business ownership can be challenging, fun and exciting. But it's also a lot of work. Can you face 12 hour work days 6 or 7 days a week? 5. How well do you plan and organize? • Research indicates that many business failures could have been avoided through better planning. • Good organization of financials, inventory, schedules, production can help avoid many pitfalls. Before Starting up, ASK YOURSELF! - 4 6. Is your drive strong enough to maintain your motivation? • Running a business can wear you down. • Some business owners feel burned out by having to carry all the responsibility on their shoulders. • Strong motivation can make the business succeed and will help you survive slowdowns as well as periods of burnout. Before Starting up, ASK YOURSELF! - 5 7. How will the business affect your family? • The first few years of business startup can be hard on family life. • The strain of an unsupportive spouse may be hard to balance against the demands of starting a business. • There also may be financial difficulties until the business becomes profitable, which could take months or years. • You may have to adjust to a lower standard of living or put family assets at risk. Before Starting up, Motivate YOURSELF! It's true, there are a lot of reasons not to start your own business. But for the right person, the advantages of business ownership far outweigh the risks. • You get to be your own boss. • Hard work and long hours directly benefit you, rather than increasing profits for someone else. • Earning and growth potential are far less limited. • A new venture is exciting. • Running a business will provide endless variety, challenge and opportunities to learn.
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